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Anonymous Authentication not available in Outlook 2007

I deployed Office 365 in an office of about 10 PCs. All went smooth except 3. It kept on popping up asking for username and password. I investigated and the only thing I could come up with was that these 3 PCs were upgraded from Office 2003 to Office 2007 where as the others were not.

So I tried to setup Office 365 manually but came across one option that is not available. On my previous setups of O365 I've noticed that Autodiscover sets the network security to Negotiate Authentication where as in the more recent ones it sets it to Basic Authentication. Well it turns out on these 3 PCs Basic is not available. I've attached a snapshot. Could this be why Autodiscover setup is failing in Outlook 2007? all updates are installed as well. I tried removing, full clean up of Office and reinstall but still same issue. This cannot be a group policy because one there's no group policy for Office, and two if it was, all machines would be affected. Please see image below:

To get Anonymous Authentication for Outlook 2007 to use Office 365 hosted exchange you must install KB2768023. To get Anonymous Authentication for Outlook 2010 to use Office 365 hosted exchange you must install KB2687608. I did all the testing and it works once these hotfixes or updates are installed. My tests were done after installing SP3 for Office 2007 and after installing SP2 for Office 2010.

Thanks for the feedback.

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We
recommend you check if these users’ passwords are about to expire. Based on my knowledge,
when user’s password is going to expire, Outlook will continue popping out a
dialog box for you to enter username and password.

Additionally,
would you please configure the account using Autodiscover to see if it works? To
do this, you need to add a CNAME record for your account. Here’s an article for
your reference:

As I mentioned, it's not an Autodiscover issue as other machines are working fine. It's only the machines which have previously had Office 2003 installed, it was removed and Office 2007 was installed. Those machines are facing the issue of not being able to add O365 account. And as I mentioned, I believe it's related to a network security option as Anonymous Authentication doesn't seem to be available on those machines.

Thanks for the feedback.

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The problem still exists; Auto detect settings was off. I tried running Office remover to completely wipe and reinstall it but still no luck. I tried installing a trial of Office 2010 but same issue. This only happens on 3 machines which had Office 2003 installed so it leads me to believe somehow it's related to that.

For now I gave up; just set it up as iMAP which also gives a certificate error every time Outlook is opened. I've read it's related to a local domain issue but can't figure that out either.

Thanks for the feedback.

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I have the issue vttech descibes too. To be able to connect Outlook to Exchange online 'Anonymous Verifcation' is required. On clients where 'Anonymous Verification' is missing, Outlook keeps requesting for username and password, but doesn't connect to the Exchange online server.

I've searched Registry and Internet multiple times but for an unknown reason on some Windows clients the option 'anonymous verfication' is missing. And I don't want to reinstall the OS.

Please help, because I have multiple clients which have this issue and I can't migrate the users to Exchange online.

I see that you've installed all Windows & Microsoft updates. If so, I'd like to know how are things going after you restart the computer. In addition, please make sure that you've installed the latest updates of Office 2007 and the latest updates for Office 365 Desktop.